2023 Mid-Year Securities Enforcement Update – Gibson Dunn

The Commission has so far not slowed its enforcement strategy, and is unlikely to do so in the months ahead.  In the Consolidated Appropriations Act of 2023, Congress agreed to give the Commission $2.2 billion in funding for the current fiscal year, a $210 million increase over the prior fiscal year. The Commission is planning to use the increased funding to hire 400 more staff members, including 125 new personnel for its Enforcement Division.  Of those 125 new hires for the Enforcement Division, 33 will be joining the Crypto Assets and Cyber Unit, a sub-unit of the Commission that has already seen heightened activity this year.  With a rapidly expanding workforce, the Commission could end up filing even more enforcement actions this year than the 760 it filed in fiscal year 2022—a 9% increase over the prior year.

With the funding to accomplish its goals, the Enforcement Division is bringing actions across the entire range of its jurisdiction, with special focus on some areas.  It is clear, for example, that the SEC will do all it can, short of new rulemaking, to tamp down the development of cryptocurrency markets and investments.  The SEC also continues to use broad sweeps involving technical violations against registered entities as a way to send deterrent messages and extract large fines—and then repeat those sweeps on a new round of registrants.  In the area of financial reporting and accounting, this Commission has brought a number of technical accounting and disclosure cases against issuers and individuals, and has pushed the boundaries of its own jurisdiction to bring charges relating to harassment and workplace misconduct under the guise of non-disclosure and internal controls failures.  As all administrations do, the SEC has maintained a steady diet of insider trading cases, and used some of those cases to send a message tied to its rulemaking.  The same is true in the cybersecurity area, where we now have final rules that will no doubt provide additional bases for the SEC to bring new cases.  Finally, the SEC recently awarded its largest whistleblower bounty in the history of the program—greater than the entire amount awarded in all of 2022—that evinces a program that has been wildly successful at attracting more and better tips from individuals with first-hand knowledge of potential wrongdoing.

Source: 2023 Mid-Year Securities Enforcement Update – Gibson Dunn